Kinetik Holdings (KNTK), among the shining stars in midstream, faces a lawsuit by Energy Transfer (ET) that challenges one of the pillars supporting the company’s rapid growth.
East Daley Analytics recently provided a recap of KNTK’s 1Q25 earnings call. We noted future earnings tailwinds from the expiration of high-cost NGL transportation contracts that expire between 2026-28.
It has come to light that ET affiliate Lone Star NGL Product Services, LLC filed a lawsuit in May ’21 against Eagle Claw Midstream Ventures, LLC
and CR Permian Processing, LLC – entities now part of Kinetik (formerly BCP Raptor). The case centers on two long-term NGL purchase agreements that run through 2026 and require Eagle Claw to sell a daily volume of Y-grade NGL mix to the ET affiliate. The value of the allegations is estimated in excess of $100MM.
ET claims KNTK is in breach of contract and is selling its Y-grade to other NGL pipelines like Shin Oak and Targa Resource’s (TRGP) Grand Prix instead of honoring the ET deal. ET’s legal argument focuses on breach of contract and possibly fraudulent inducement or concealment. For example, ET alleges Eagle Claw installed a secret ‘jumper’ pipeline to divert NGLs away from Lone Star (see picture above).
The KNTK Raptor system now has plant capacity of almost 1.3 Bcf/d, and the legal claim is for Y-grade produced from the first 840 MMcf/d of rich gas processed at Eagle Claw’s East Toyah and Caprock facilities. Total NGL production from the Delaware Basin G&P system is shown above from Energy Data Studio. There are gaps in state-reported NGL data at the Raptor system, but NGL production has averaged 108 Mb/d from rich-gas plant inlets of 946 MMcf/d over the trailing twelve months ending April ’25.
What is unclear is the volume of NGL production being delivered to ET under the long-term agreement. EDA estimates 75 Mb/d of contracted NGLs will roll off ET and onto Shin Oak and Grand Prix by YE26. – Rob Wilson, CFA Tickers: ET, KNTK, TRGP.
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